House lawmakers on Tuesday skewered the head of Wells Fargo as he argued that the bank has made vast improvements and turned the page in the aftermath of scandals that led to a slew of lawsuits and unprecedented federal and state penalties.
Wells Fargo President and CEO Timothy Sloan told members of the House Financial Services Committee that the company has improved its internal oversight, overhauled its management and compensated customers harmed by misconduct across almost every line of its business in the three years since the scandals.
“Wells Fargo is committed to making things right with our customers and earning back the public’s trust. We are dedicated to compensating every customer who suffered harm because of our mistakes,” Sloan said at the hearing.
But his testimony did little to appease lawmakers in both parties just days after The New York Times reported that Wells Fargo employees are still breaking rules to meet performance standards tied to sales goals.
Rep. Maxine WatersMaxine Moore WatersThe Hill's 12:30 Report - Presented by Facebook - Arizona recount to show Trump's loss by even wider margin Biden criticizes treatment of Haitians as 'embarrassment' The Memo: Biden's immigration problems reach crescendo in Del Rio MORE (D-Calif.), the head of the committee, called Wells Fargo a “recidivist financial institution that created widespread harm with a broad range of offenses” and suggested the bank could be “too big to manage.”
“All the changes that you said you have made are not evident,” Waters said. “Why should the bank continue to be the size that it is?”
Sloan blamed Wells Fargo’s woes on a decentralized risk management structure and the bank’s previous “incentive plan that was much too focused on selling products as opposed to providing good service and advice.”
He said the company has made “fundamental” upgrades to its oversight and compliance efforts by hiring more than 3,000 risk management professionals.
Wells Fargo has replaced seven of the 10 board members who led the bank in February 2016, and it hired new chief risk and compliance officers.
“We have more work to do,” Sloan added, insisting the bank would “act with honesty, integrity and accountability.”
Sloan faced anger from both sides of the aisle, a rare backlash from a panel with a history of partisan bickering.
Rep. Patrick McHenryPatrick Timothy McHenryBiden taps big bank skeptic to for top regulatory post Lawmakers introduce bill to create commemorative coins to honor working dogs Lobbying world MORE (N.C.), the panel’s top Republican, criticized the company for steady reports of sales scandals since 2016.
"Each time a new scandal breaks, Wells Fargo promises to get to the bottom of it. It promises to make sure it doesn’t happen again," he said. "But a few months later, we hear about another case of dishonest sales practices or gross mismanagement."
McHenry told Sloan he wanted to hear about “your commitment that you will do what is necessary to make sure this won’t happen again.” He asked Sloan if “your customers are going to hear more of bad actions taken by your company.”
“I can’t control the media,” Sloan replied, while adding, “The changes that we’ve implemented since I’ve become CEO are going to prevent them from occurring as best we can.”
Rep. Ann WagnerAnn Louise WagnerConservative women's group endorses Sarah Huckabee Sanders for Arkansas governor FOSTA is model for reforming Section 230 Navy admiral criticizes defense contractors over lobbying efforts MORE (R-Mo.) said Wells Fargo “betrayed” the trust and “took advantage of customers in order to meet sales performance goals and fraudulently improve earnings and share prices.”
Sloan's hearing was a preview of the tough oversight Waters has vowed to enforce on the nation's financial institutions since taking over the panel. The CEOs of other major U.S. banks are expected to appear before the committee later this year.
Waters said Wells Fargo epitomized a bank that had grown too big to hold itself accountable.
After the hearing, Waters said she would reintroduce a bill that would break up big banks with track records of customer abuse, adding that it would likely apply to Wells Fargo. She also suggested regulators take a look at removing Sloan from the bank.
But Republicans rejected Waters’s connecting Wells Fargo’s scandals to its size, blaming mismanagement and incompetence instead of its $1.87 trillion in assets.
“Your actions have fueled the hyperbolic and anti-bank rhetoric that you will hear today," Rep. Andy BarrAndy BarrRepublicans press Biden administration to maintain sanctions against Taliban World Bank suspends aid to Afghanistan after Taliban takeover GOP lawmaker aims to block Taliban from accessing international funds MORE (R-Ky.) told Sloan. He said the bank “damaged and mistreated its customers,” but that it “had nothing to with size.”
Wells Fargo’s troubles began in September 2016 when the Consumer Financial Protection Bureau (CFPB) fined the bank $185 million for opening and charging fees on more than 1 million accounts for customers without their consent.
Former CEO John Stumpf retired in October 2016 and was replaced by Sloan, a 32-year veteran of Wells Fargo.
Sloan pledged to reform the bank and its image as the company faced scrutiny from federal and state regulators. That task became substantially harder in January 2018, when the Federal Reserve banned Wells Fargo from expanding its operations.
The Fed ordered Wells Fargo to conduct an internal probe into its internal oversight and risk management and explain how it planned to prevent future scandals.
Sloan could face a tougher challenge as Wells Fargo works to convince the Fed to lift those restrictions, the strongest ever placed on a bank and which are still in place. Wells Fargo has paid more than $1.5 billion in penalties to state and federal regulators and more than half a billion to settle lawsuits related to customer abuse.
The bank landed in hot water again in April 2018 when it paid $1 billion to the CFPB and Office of the Comptroller of the Currency to resolve allegations it had charged mortgage borrowers inappropriate fees and forced loan customers to purchase unnecessary auto insurance.
The bank said hundreds of customers who were unable to pay those higher costs lost homes to foreclosure due to a glitch that miscalculated whether customers were eligible for an interest rate cap.
“Your bank foreclosed on 545 customers because of that error,” said Rep. Rashida TlaibRashida Harbi TlaibOcasio-Cortez explains 'present' vote on Iron Dome Holding back on defensive systems for Israel could have dangerous consequences Overnight Defense & National Security — Iron Dome funding clears House MORE (D-Mich.). “They didn’t lose a boat. They lost their home. What are you doing to help them?”
Sloan replied that the bank sent a $15,000 check to each customer who lost a home because of the error and offered to compensate victims in other ways if they reached out to the bank. He added that Wells Fargo had sought to scrap records of the foreclosures from affected customers’ credit reports.
But the hearing highlighted the bank's challenges as it looks to move forward.
"If I were you and I really wanted to do the right thing, put this bank on the right path: Break it up," said Rep. Stephen LynchStephen Francis LynchPelosi signals she won't move .5T bill without Senate-House deal Overnight Defense: Military justice overhaul included in defense bill | Pentagon watchdog to review security of 'nuclear football' | Pentagon carries out first air strike in Somalia under Biden Pentagon watchdog to review security of 'nuclear football' MORE (D-Mass.).
Updated at 4:26 p.m.